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Flash indicator of macroecnomic inflation CPI or flash GDP daflator ? Flash indicator of macroecnomic inflation Most of economists around the world use CPI. Why? 1. CPI is a really “flash” indicator 2. CPI looks like a good aproximation for the more fundamental GDP deflator Flash indicator of macroecnomic inflation BUT CPI does not indicate real macroeconomic inflalation because prices for capital goods and commodities are not included Price bubbles can not be reflected Flash indicator of macroecnomic inflation 110 108 106 104 102 100 98 96 CPI GDP deflator 94 92 90 Q105 Q305 Q106 Q306 Q107 Q307 Q108 Q308 Q109 Q309 Flash indicator of macroecnomic inflation Conclusions: • Flash GDP should be estimated at both current and constant prices • GDP implicite deflator should be estimated also for monthly time series • CPI should be replaced by flash GDP deflator as a basic indicator of macroeconomic inflation